AFRICAN DEVELOPMENT BANK GROUP UNION OF THE COMOROS INSTITUTIONAL CAPACITY BUILDING PROJECT (ICBP) PHASE II

Transcription

1 AFRICAN DEVELOPMENT BANK GROUP UNION OF THE COMOROS INSTITUTIONAL CAPACITY BUILDING PROJECT (ICBP) PHASE II OSGE/GECL DEPARTMENTS November 2015 Translated Version

2 TABLE OF CONTENTS I. STRATEGIC ORIENTATION AND RATIONALE Project Linkages with Country Strategy and Objectives Rationale for Bank Intervention Aid Coordination... 4 II. PROJECT DESCRIPTION Project Components Technical Solutions Selected and Alternatives Explored Project Type Project Cost and Financing Arrangements Project Target Area and Beneficiaries Participatory Approach for Project Identification, Design and Implementation Bank Group Experience and Lessons Reflected in Project Design Key Performance Indicators... 8 III. PROJECT FEASIBILITY Economic and Financial Performance Environmental and Social Impacts... 9 IV. PROJECT IMPLEMENTATION Implementation Arrangements Monitoring Governance Sustainability Risk Management Knowledge Development V. LEGAL INSTRUMENT AND AUTHORITY Legal Instrument Conditions for Bank Involvement Compliance with Bank Policies VI. RECOMMENDATION... 14

3 LIST OF TABLES Table 1 : Current and Future Projects of other Donors in Areas covered by ICBP II Table 2 : Description of ICBP II Activities Table 3 : Project alternatives considered and reasons for rejection Table 4 : Project Cost by Component Table 5 : Project Cost by Expenditure Category Table 6 : Project Cost by Source of Financing Table 7 : Expenditure Schedule by Component Table 8 : Lessons Learned from Other Projects and their Reflection in ICBP II Formulation Table 9 : Key Performance Indicators Table 10: Monitoring Milestones and Feedback Table 11: Risks and Mitigation Measures LIST OF ANNEXES Annex I Annex II Annex III Annex IV : Comparative Socio-Economic Indicators : Table of AfDB Portfolio in the Country : Rationale for Bank Group Contribution of above 90% of the Total Project Cost to ICBP II Financing : Map of Project Area i

4 CURRENCY EQUIVALENTS (September 2015) UA 1 = KMF UA 1 = EUR 1.25 EUR 1 = KMF FISCAL YEAR 1 January to 31 December ii

5 List of Acronyms and Abbreviations ABGE ADF AGID CDP CGP CPIA CSP DGEME DREME EARC EDA EUR GAP GDP GoC HCPI HIPCI HIPI ICBP IMF INSEED KMF MA-MWE MFEBICP PAMOCI PARSE PARSEGF PASEC PEFA PFM PIP PIS SCADD SCN TFP TSF UA USD Good Economic Governance Support African Development Fund General Administration of Taxation and Customs Public Expenditure Chain General Commission for Planning Country Policy and Institutional Assessment Country Strategy Paper General Directorate of Energy, Mines and Water Regional Directorate of Energy, Mines and Water East Africa Resource Centre Electricité d Anjouan (Electricity Corporation of Anjouan) Euro Governance Strategic Framework and Action Plan Gross Domestic Product Government of the Comoros Harmonized Consumer Price Index Heavily Indebted Poor Countries Initiative Harmonized Industrial Production Index Institutional Capacity Building Project International Monetary Fund National Institute of Statistics and Economic and Population Studies Comorian Franc Electricity and Water Management in the Comoros Ministry of Finance, Economy, Budget, Investment and External Trade in charge of Privatization Resource Mobilization and Institutional Capacity Building Support Project Energy Sector Reform Support Programme Energy Sector Reform and Financial Governance Support Programme Comoros Energy Sector Support Project Public Expenditure and Financial Accountability Public Finance Management Public Investments Programme Project Implementation Structure Accelerated Growth and Sustainable Development Strategy National Accounting System Technical and Financial Partner Transition Support Fund Unit of Account US Dollar iii

6 GRANT INFORMATION Client DONEE : Union of the Comoros EXECUTING AGENCY : Ministry of Finance, Economy, Budget, Investment and External Trade in charge of Privatization/ ICBP II Implementation Structure Financing Plan Source Amount (in UA million) Instrument TSF Pillar I 6.00 TSF Grant Government Total Amount 6.00 TSF Grant Important TSF Financing Information Grant Currency Type of Interest Rate Interest Rate Margin Commitment Fee Other Fees Tenor Grace Period NPV (Baseline scenario) ERR (Baseline scenario) UA Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Not Applicable Implementation Schedule Milestones (Expected) Activities Dates Preparation July 2015 Appraisal September 2015 Negotiation October 2015 Project Approval November 2015 Effectiveness December 2015 Mid-term Review August 2017 Project Completion April 2019 Last Disbursement July 2019 iv

7 PROJECT SUMMARY Project Overview Project Beneficiaries Needs Assessment and Relevance Bank Value Added Knowledge Building Project Name: Institutional Capacity Building Project (ICBP I) Phase II Geographic Coverage: Union of the Comoros nationwide General Schedule : 41 months (December April 2019) Financing : UA 6 million (TSF Pillar I Grant) Project Components: (i) Improvement of internal resource mobilization; (ii) Improvement of development strategy implementation; and (iii) Project management Expected Outcomes: The main expected outcomes of ICBP II are: (i) improved performance of tax revenue services resulting in improved tax/gdp ratio at 14.7% in 2019; and (ii) improved implementation of the development strategy resulting in more equitable use of public resources channeled more towards priority expenditure and thus, a higher CPIA score on equity in public resource use, which would stand at 3.2 in The Comorian public administration will benefit from ICBP II through support given to AGID, CGP, Island General Directorates for the Plan, INSEED, DGEME and DREME. Indeed, through ICBP II, the technical and financial capacity of Government departments in the Comoros will improve. The project will indirectly benefit the two national electricity corporations (MA-MWE and EDA) by improving the country s capacity to plan/programme the development of the electricity sub-sector. The entire Comorian population (including women and youths) will also benefit from the programme since it will help to improve their access to quality basic services through efficient implementation of SCADD For decades, the Union of the Comoros has experienced a succession of political crises, which has weakened the country and the Government s institutional and financial capacity (the last political crisis was in 2008). The Government can no longer provide quality social services to the population and finance the construction of infrastructure required for economic diversification and the country s gradual exit from its situation of fragility. To remedy the situation, particularly within a context of dwindling external financing, it seems indispensable to significantly boost internal resource mobilization, which is low due to the tax administration s weak capacity. For example, the tax/gdp ratio was estimated at 12% in Furthermore, to ensure a significant impact on the country s development, an improvement in the capacity and performance of tax revenue services needs to be accompanied by enhancement of the country s capacity to implement the development strategy. Indeed, the country s capacity is weak particularly in: (i) economic planning/programming; and (ii) preparation of statistics. In addition, in order to continue improving overall public finance management and economic governance in the Comoros, it is essential to consolidate the achievements of ICBP I. This project, which will close on 31 October 2015 and covered a very broad intervention area, contributed significantly to Comoros score of C and above for 9 PEFA indicators in 2013, up from 6 in For the impact to be significant, the consolidation of ICBP I achievements must be based on a selective approach centred on the country s current priority needs. By supporting only internal resource mobilization and implementation of the development strategy, ICBP II is fully consistent with this approach, which makes the project relevant. The main Bank value added in ICBP II will be support for capacity building in core areas for Comoros to gradually exit from its situation of fragility. By so doing, ICBP II will help to consolidate the privileged partner position occupied by the Bank in Comoros as regards PFM and economic governance, thanks to ICBP I. ICBP II will contribute to knowledge building in internal resource mobilization and implementation of development strategies in fragility contexts. The technical assistance and training offered during this project will help to identify and disseminate good institutional capacity building practices in the Bank and Government departments in Comoros. The knowledge will be disseminated particularly through the various ICBP II reports (monitoring-evaluation reports, supervision reports, and the completion report). v

8 Results-Based Logical Framework Country and Project Name: Union of the Comoros Institutional Capacity Building Project (ICBP) Phase II Project Goal: Improve internal resource mobilization and development strategy implementation PERFORMANCE INDICATORS RISKS/ RESULTS CHAIN Indicator (including CSIs) Baseline Sit. Target MOV. MITIGATION MEASURES OUTCOMES IMPACT PRODUITS ACTIVITIES CLÉS Inclusive economic growth conducive to the country s gradual exit from its situation of fragility Internal resource mobilization is improved Development strategy implementation is improved GDP growth rate 0.6% in % in 2020 % of the population living below the poverty line 45.6% in % in 2020 MFEBICP, CGP, IMF, AfDB, WB, UNDP Tax revenue/gdp ratio 12% in % in 2019 MFEBICP, IMF CPIA score on equity in public resource use Component I: Improvement of internal resource mobilization I.1 Improvement of the tax administration s management I.2 Strengthening of the tax administration s human capacity and responsible tax behaviour Operationalization of AGID technical services 2.33 in in 2019 AfDB Technical services of AGID are not operational All AGID technical services have an organizational chart, a procedures manual and staff in 2017 Tax management software Non-existent A tax management software is installed in 2018 Number of AGID staff trained in taxation, tax audit and tax collection Number of national tax awareness campaigns Component II: Improvement of development strategy implementation II.1 Strengthening of economic planning/programming II.2 Capacity building in statistics preparation COMPONENTS Number of civil servants trained in economic planning/programming (CGP, General Directorates of Island planning, DGEME and DREME) IT tools for economic planning/programming Sector strategies aligned on the national development strategy and having a strong gender component and related action plans National accounts as per SCN 93 IHPC National poverty survey taking into consideration gender Component I: Improvement of internal resource mobilization Technical assistance, training, equipment and works Component II: Improvement of development strategy implementation Technical assistance, training, equipment and studies Component III: Project management AGID staff do not sufficiently master taxation and modern tax control and collection techniques The last national tax awareness campaign was conducted in 2012 Government administrative staff are not familiar with modern techniques of economic planning/programming and a multi-year PIP is not prepared Absence of IT tools for economic planning/ programming Existence of three sector strategies only partially aligned on the national development strategy and with a weak gender component The last final national accounts as per SCN 93 concerning FY 2008 The last monthly IHPC published concern December 2013 A survey was conducted in AGID workers (at least 30% of them women) are trained in taxation, as well as tax control and collection in national tax awareness campaigns are organized in civil servants (at least 30% of them women) are trained in economic planning/programming in 2019, a comprehensive multi-year PIP aligned on the national development strategy is prepared, implemented and monitored as from 2016 IT tools for economic planning/programming are installed in the CGP, Island General Directorates for the Plan, DGEME and DREMEs in sector strategies (private sector, tourism and land tenure) fully aligned on the national development strategy and with strong gender mainstreaming are prepared in 2017 as well as the related action plans Final national accounts for FY and provisional national accounts for 2018 are available in 2019 (SCN 93) Monthly IHPCs for FY 2016, 2017 and 2018 are available and disseminated in 2019 Survey results helped in preparing the poverty profile and adopting a gender-based approach are available in 2019 AGID, Project monitoring reports MFEBICP CGP, Island General Directorates of the Plan, DGEME, DREME Project monitoring reports Sector strategies and action plans INSEED, Project monitoring reports National poverty survey report R1: Risk of political instability related to the organization of presidential elections in 2016 Mitigation Measures: The support of regional and international organizations for the strengthening of national cohesion and improvement of governance will help to maintain relative political stability. R2: Weak reform momentum Mitigation Measures: Government s strong commitment to pursue structural reforms evident in the preparation of SCADD Donor support for the implementation of reforms will help to maintain the reform momentum R3 : Fiduciary risk linked to inappropriate use of project resources Mitigation Measures: Project resources will be managed pursuant to Bank rules and procedures by the project executing agency which executed ICBP I, and whose performance was deemed acceptable by the Bank The project s estimated cost is UA 6 million: TSF Grant (Pillar I) vi

9 Provisional Implementation Schedule of ICBP II Activities Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Start-up Preliminaries Board approval Grant effectiveness Launching mission Component 1: Improvement of internal resource mobilization Sub-component 1.1: Improvement of the tax administration s management Operationalization of AGID and proposal of instruments to improve tax administration Installation of tax management software at AGID Installation of modern, high performing and adequate IT equipment at AGID Rehabilitation of AGID buildings Sub-component 1.2: Strengthening the tax administration s human capacity and responsible tax behavior Training in taxation, tax audit and collection for AGID workers Organization of national tax awareness campaigns Technical assistance for tax audit and recovery vii

10 Activities Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Component 2: Improvement of development strategy implementation Sub-component 2.1: Capacity building in economic planning/programming Technical assistance and training to prepare a comprehensive multi-year PIP aligned to the national development strategy Training in economic planning/programming for the CGP and Island General Directorates Technical assistance for the preparation of economic planning/programming manuals Technical assistance for development strategy monitoring and implementation Preparation of 3 sector strategies (private sector, tourism and land tenure) and the related action plans Support for aid coordination and harmonization Installation of IT tools for public investments programming in CGP and Island DGPs Training of DGEME and DREME staff in energy sector planning and development Technical assistance for energy sector planning and management Sub-component 2.2: Capacity building in statistics preparation Preparation of national accounts for period (SCN 93) Collection of price-related data and publication of IHPCs National poverty survey taking into account gender viii

11 Activities Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Component 3: Project Management Management and coordination Supervision missions Project mid-term review Annual audits Project closure Project final audit ix

12 PROPOSAL AND RECOMMENDATION OF MANAGEMENT TO THE BOARDS OF DIRECTORS OF THE AFRICAN DEVELOPMENT BANK GROUP CONCERNING A TRANSITION ASSISTANCE FUND GRANT TO THE UNION OF THE COMOROS TO FINANCE THE INSTITUTIONAL CAPACITY BUILDING PROJECT (ICBP) PHASE II This proposal concerns a Transition Support Fund (TSF) Grant of UA 6 million from Pillar I resources to the Union of the Comoros to finance the Institutional Capacity Building Project (ICBP) II. The project aims to support the Comoros Islands in their efforts to exit from their situation of fragility. I. STRATEGIC ORIENTATION AND RATIONALE 1.1 Project Linkages with Country Strategy and Objectives ICBP II is consistent with the Accelerated Growth and Sustainable Development Strategy (SCADD) of the Union of the Comoros, which targets inclusive, accelerated and diversified growth. It will contribute particularly to the implementation of the strategy s fourth pillar entitled Strengthening of governance and institutional and human resilience capacity. ICBP II will also help to implement the Union s Public Finance Management Reform Strategy (PFM) aimed at establishing a transparent and efficient PFM system ICBP II is aligned on the Bank Group s Ten-Year Strategy aimed at inclusive growth and transition towards green growth. It is consistent particularly with this strategy s operational priority No. 4, namely Governance and accountability. It is also in line with the Country Strategy Paper (CSP) since its single pillar Energy sector development to support economic diversification 1 will be implemented by improving PFM. ICBP II was incorporated in the CSP during its mid-term review in November As such, it will be aligned on the CSP being prepared whose single pillar is Development of basic infrastructure, including energy infrastructure and roads, to support economic diversification. ICBP II s contribution to the implementation of the next CSP will be by improving economic governance. It will also contribute to the implementation of the Bank Group Strategy on Addressing fragility and building resilience in Africa as it is aligned especially on its first pillar Strengthening of State capacity and establishment of efficient institutions. In addition, ICBP II is consistent with the guidelines of the Governance Strategic Framework and Action Plan (GAP II); it will, in particular, contribute to the implementation of the first two pillars, namely: (i) public sector and economic management; and (ii) sector governance. 1.2 Rationale for Bank Intervention The Union of the Comoros has, since 2010, enjoyed relative political stability. From independence in 1975, the Union, comprising the islands of Anjouan, Grande Comore and Mohéli, has suffered a succession of separatist crises. After the last crisis in 2008 was resolved, the Constitution was amended to strengthen the powers of the country s three islands. Later in 2010, transparent presidential elections were organized, leading to relative political stability, subsequently confirmed during the legislative and municipal elections, as well as the election of the islands councilors held in the first quarter of In the Comoros, the weaknesses of the electricity sub-sector are the primary obstacles to economic development. 2 The next presidential elections will take place in May

13 Despite relative political stability, the Union of the Comoros remains in a fragile situation, particularly at the socio-economic level 3. This stems mainly from: (i) the weak cohesion between the federal and island administrations; (ii) the narrow production base of the Comoros economy 4 ; (iii) the lack of basic economic infrastructure; and (iv) the country s exposure to the negative effects of climate change. This fragile situation has eroded the human and financial capacity of the Government, which can no longer provide the population with quality basic services. Therefore, most of the Millennium Development Goals (MDG) will not be attained in In 2014, the Union of the Comoros was ranked 159 th out of 187 nations on the Human Development Index. Furthermore, the country s electrification rate is below 50%, and power cuts occur virtually on a daily basis. The annual economic growth rate is not sufficient to drive the country s development. Indeed, the GDP growth rate in 2014 was estimated at 0.6 %, which is lower than in 2013 when the economic growth stood at 3.5%. This slowdown in growth stems mainly from: (i) the country s deficient electrical power supply 5 ; which hurts economic activity; and (ii) slower implementation of the public investment programme (PIP) due especially to the weak internal resource mobilization capacity and shrinking external financing. Furthermore, due mainly to lower than expected tax collection by over 13% and an unplanned recruitment of a significant number of teachers 6, the year 2014 was marked by salary arrears The Union of the Comoros exit from the fragility situation requires significant improvement of the country s capacity to mobilize internal resources. To gradually exit from the situation of fragility in which the country finds itself, the Government must be able to finance its recurrent expenditure, as well as the cost of implementing the national development strategy which lays emphasis on the construction of basic economic infrastructure. To that end, particularly within a context of shrinking international aid, it seems indispensable to significantly step up internal resource mobilization, which is low in the Comoros. Indeed, the tax revenue/gdp ratio was estimated at 12% in This low level can be attributed to the tax administration s reduced technical and human capacity To address this situation, the Government of the Comoros (GoC) initiated a reform of the tax administration in The reform objectives include putting an end to the fragmentation of the tax administration split into 4 distinct administrations (one for the Union and one for each island). Indeed, this set up impedes efficient mobilization of tax revenue, leading to duplication of functions and creating a favourable climate for fraud. The reform also introduces simplified tax regulations. The objective is to broaden the tax base and improve collection. The tax reform initiated by GoC also seeks provide the tax administration with modern and efficient working resources, as well as strengthen the audit capacity of taxation officers who have very little mastery of audit techniques. This reform is still ongoing and the key milestones achieved include: (i) the adoption in 2011 of a new General Tax Code ; (ii) the preparation of a tax procedures manual in 2013; and (iii) the creation (in 2012) and adoption of the statutes (in 2013) of the new unified tax administration called General Tax and Customs Administration (AGID). Nevertheless, due to insufficient capacity, the new tax administration is still not operational and the tax collection services still perform inadequately In addition to significantly improve internal resource mobilization, the national development strategy also needs to be effectively implemented to gradually pull the country out of its fragility situation. Since 2010, the Comoros islands have a well-defined national development strategy. However, the attainment of the country s development objectives is seriously hampered by deficient arrangements in place for implementing and 3 Cf. Technical Annex C.5 related to fragility. 4 In Comoros, 50% of the Gross Domestic Product (GDP) is generated by agriculture. 5 Cf. Technical Annex C.3 on the electricity sub-sector, whose deficiencies obstruct the socio-economic development of Comoros. 6 The electoral context of 2014 is the cause of this unplanned recruitment of significant numbers of teachers. 7 On 31 August 2015, salary arrears represented 3 months of salaries. 8 The average tax revenue/gdp ratio is about 19% in Sub-Saharan Africa and 29.2% in Seychelles (a neighbouring archipelago to Comoros). 2

14 monitoring the strategy. As this retards the country s gradual exit from fragility 9, most of the MDGs will not be attained in Indeed, the High Commission for the Plan (CGP), tasked with preparing and monitoring the implementation of the national development strategy lacks adequate technical and human capacity. This is evidenced in: (i) the absence of a global PIP 10 aligned on development priorities; (ii) inadequate linkage between budgeted capital expenditure and the national development strategy; and (iii) inadequate monitoring-evaluation of the national development strategy. These weaknesses are compounded by: (i) the near-absence of sector development strategies aligned on the national development strategy; (ii) the weak technical and human capacities of the three islands General Directorates for the Plan, which participate in PIP implementation; and (iii) the irregular and insufficient production of reliable statistics by the National Institute of Statistics and Economic and Population Studies (INSEED) Furthermore, the electricity sub-sector, whose weaknesses impede development on the Comoros islands, is marked by lack of planning and programming at the General Directorate of Energy, Mines and Water (DGEME) and its three regional directorates (DREME) 12. Their weak technical and human capacity hampers the preparation and management of the electricity sub-sector development strategy aligned on the national development strategy. To remedy the situation, the Bank Department of Energy will in 2016 finance technical assistance under TSF Pillar III for the preparation of a master plan for electrical power generation, transmission and distribution, as well as for the development of renewable energy. It is crucial for DGEME and the three DREMEs to rapidly have adequate capacity to manage the said master plan 13. That will help to create a more conducive environment for the implementation of the Energy Sector Support Project (PASEC) financed by the Bank for UA million aimed at boosting power generation in the Comoros islands ICBP II is also justified by the need to consolidate the achievements of ICBP I and carry out activities complementary to those financed by ICBP I in PFM and economic governance 14. This project enabled the country to reach the completion point of the Heavily Indebted Poor Countries Initiative (HIPCI) in December 2012 by mainly supporting the preparation of the monitoring-evaluation reports of the Growth and Poverty Reduction Strategy by CGP. It also helped the Comoros obtain a score a C and above for 9 PEFA indicators in 2013 compared to 6 in The flagship activities of ICBP I were centred on computerizing the public expenditure chain (CDP) and strengthening the human capacity of its stakeholders. Overall, the specific objective of strengthening PFM control was achieved. Furthermore, ICBP I strengthened the operational capacity of CGP and lay the methodological basis for the production of national accounts in accordance with national system of accounts (SCN) 93 and Harmonized Consumer Price Index (HCPI) 15, as well as conduct a survey in However, despite the significant achievements of ICBP I, the capacity of the Comorian public administration remains very weak, and this hinders the country s gradual exit from its situation of fragility. For example, in 2014, the average Country Policy and Institutional Assessment (CPIA) score of Comoros published by the Bank was 2.55 for the following three criteria: (i) economic management; (ii) structural policies; and (iii) social inclusion/equity policies. Consequently, it is necessary for the Bank to continue giving support to the Comoros Islands as was the case in ICBP I. As such, the Bank s key value added under 9 Cf. Technical Annex C The current PIP s annual presentation format makes it impossible to perceive the multi-year nature of investment projects. Moreover, this PIP does not include all public investments financed by international assistance. 11 INSEED, under the Ministry of Finance, Economy, Budget, Investment and External Trade, in charge of privatization (MFEBICP) was created in January 2014 to replace the General Directorate of Statistics and Prospective, which was placed under CGP. 12 Cf. Technical Annex C Although the consultant entrusted with the design of the master plan will offer initial training for its update and monitoring, ICBP II aims to consolidate and strengthen these achievements through support for the day-to-day management of the master plan. 14 Cf. Technical Annex C.4 on the outcomes of ICBP I and the linkages between ICBP I and II. 15 Before the ICP I support, Comoros was using SCN 68 and produced obsolete price indices. 3

15 ICBP II will be to support capacity building in key areas for the Comoros gradual exit from its situation of fragility. By so doing, ICBP II will contribute to consolidating the Bank s position of privileged partner in PFM and economic governance, thanks particularly to ICBP I and the Private Sector Capacity Building Support Project (UA 625,000). Since the latter project supports SME development and formalization, as well as contributes to a broader tax base, it is complementary with ICBP II which will mainly enhance tax audit and improve civic behaviour so as to broaden the tax base. 1.3 Coordination of Interventions by Technical and Financial Partners There has been a formal partnership between the donors and GoC ever since the Strategic Development Assistance Coordination Committee, which is placed under the authority of CGP and attached to the Presidency of the Union, was established in However, this mechanism is not dynamic due to lack of technical and human resources. Donor collaboration is operational within the development partners forum and sector technical groups. The objective of this platform is to foster cohesion between the various interventions and their alignment on national priorities. ICBP II was designed in consultation with the IMF, the World Bank and French Cooperation within the public finance technical sector group. It will not only be complementary to the World Bank s Good Economic Governance Support Project (ABGE) 16 (for USD 5.3 million), but will also support public expenditure streamlining by financing the main CDP computerization software 17. ICBP II is also complementary to a capacity building project being prepared by the French Cooperation. The project will start up in early 2016 (estimated amount of EUR 0.8 million) and will support capacity building in audit, budgetary management and customs resource mobilization. In addition, ICBP II will be in synergy with the World Bank s Statistics Development Support Project 18, which supports the national statistics development strategy update. Furthermore, since it supports building the planning capacity of DGEME and DREMEs, ICBP II will also be complementary to the World Bank s Energy Sector Rehabilitation Project. The latter project, of an amount of USD 5 million, finances building of the commercial capacity of MA-MWE (the main national electricity company), under the technical supervision of DGEME, and the overhaul of the institutional and regulatory framework of the electricity sub-sector. Table 1: Current and Future Projects of Other Donors in Areas covered by ICBP II World Bank Donors French Cooperation Internal Resource Mobilization X Economic Planning/Programming Preparation, Production and Dissemination of Statistics X II. PROJECT DESCRIPTION 2.1 Project Components ICBP II seeks to improve internal resource mobilization and development strategy implementation, both of which are essential for the Comoros Islands to gradually exit from the situation of fragility. To achieve this objective, ICBP II has two operational components, as well as the third related to project management 19 namely: (i) improvement of internal resource mobilization; (ii) improvement of implementation of the development strategy; and (iii) project management. The two operational components are complementary. Indeed, increasing internal resources under the project s first component and more efficiently implementing the country s development strategy under the second component will help to 16 Currently, apart from AfDB, the World Bank is now the only donor with active PFM and economic governance projects. 17 Via ICBP I, the Bank financed the installation of the technical architecture and IT equipment for CDP computerization. 18 The amount of this support is USD 358, The detailed description of project components is attached as Technical Annex C.1. 4

16 create favourable conditions for financing priority expenditure for the Comoros to gradually exit from its fragility situation. Specifically, the first component will create more budgetary leeway to finance the implementation of the development strategy which pays special attention to the construction of core economic infrastructure. This will foster private sector development, which will create a dynamic economy leading to higher tax revenue. Table 2: Description of ICBP II Activities Components I. Improvement of internal resource mobilization (cost in UA Thousand 3,268) II. Improvement of the development strategy implementation (Cost in UA Thousand: 1,963.44) III. Project management (Cost in UA Thousand: ) Cost in UA Thousand Sub-components Description of Main Activities 2, I.1 Improvement of the tax Operationalization of AGID and proposal of administration s management instruments to the tax administration s management Installation of a tax management software at AGID Installation of modern and efficient IT equipment at AGID Rehabilitation of AGID buildings I.2 Strengthening of the tax Training in taxation, tax control and recovery administration s human capacity and responsible tax behaviour II.1 Strengthening of economic planning/programming capacity for AGID workers Organization of national tax awareness campaigns Technical assistance for tax audit and collection Technical assistance and training for the preparation of a comprehensive multi-year PIP aligned ono the national development strategy Training in economic planning/programming for CGP and Island General Directorates for the Plan Technical assistance for the preparation of economic planning/programming manuals Technical assistance for development strategy monitoring and implementation Preparation of 3 sector strategies (private sector, tourism and land tenure) and the related action plans aligned on the national development strategy and having a strong gender component Support for aid coordination and harmonization Installation of public investment IT programming tools in CGP and Island General Directorates for the Plan Training of DGEME and DREME staff in energy sector planning and development Technical assistance for energy sector planning and management Installation of IT planning tools at DGEME and DREMEs II.2 Capacity building in Preparation of national accounts for the statistics preparation 2018 period (SCN 93) Collection of data on prices and publication of monthly HCPIs for FY 2016, 2017 and 2018 National poverty survey mainstreaming gender Project management and coordination Project monitoring-evaluation Project audit 5

17 2.2 Technical Solutions Adopted and Alternatives Explored The lessons learned in the management of the Bank s portfolio in the Comoros, including ICBP I, informed the design and appraisal of ICBP II, as well as the choice of technical solutions adopted for project implementation and management. Table 3: Project alternatives considered and reasons for rejection Alternative name Brief description Reasons for rejection Alternative n 1 Alternative n 2 Set up a new Project Implementation Structure (PIS) for the management of ICBP II. Support the customs administration and control structures through the ICBP II. The executing structure of ICBP I has an adequate knowledge of Bank rules and procedures. It is operational and can manage ICBP II. The French Cooperation will support the customs administration and control structures through a capacity building project in Project Type ICBP II is an institutional support project financed by a TSF Pillar I Grant. It will help to build the institutional capacity of Comorian Government departments to mobilize internal resource and implement the country s development strategy. 2.4 Project Cost and Financing Arrangements ICBP II is an institutional support project whose estimated cost, net of taxes and custom duty, is UA 6 million. The Bank will finance the total project cost through TSF Pillar I resources. Justification for the Bank Group s contribution to the financing of over 90% of the total cost of ICBP II is found in Annex 3 of this document. The justification is consistent with the policy on expenditure eligible for Bank Group financing operations 20, and based mainly on the country s fragility situation and current budgetary tensions with three months of salary arrears as at 31 August Tables 4 to 6 present the project cost estimates by component, expenditure category, and source of financing. A detailed table of the project cost estimates is attached as Technical Annex B.2. Table 4: Cost Estimates by Component Millions KMF Thousands UA COMPONENTS For. Loc. For. Loc. % For. Currency Total Total Currency Currency Currency Currency Component I. Improvement of internal resource mobilization 1, , , , % Component II. Improvement of the development strategy implementation , , , % Composante III. Project management % TOTAL BASE COST 2, , , , , , % Physical contingengy (2%) Price contingeny (3%) TOTAL PROJECT COST 2, , , , , , % 20 ADB/BD/WP/2007/106/Rev.2 ADF/BD/WP/207/72/Rev.2 of 2 May

18 Table 5: Cost Estimates by Expenditure Category CATEGORIES OF EXPENDITURE For. Currency Millions KMF Thousands UA % For. Currency Loc. For. Loc. Total Total Currency Currency Currency Goods 1, , , , % Services 1, , , , % Works % Operating costs % TOTAL BASE COST 2, , , , , , % Physical contingengy (2%) Price contingeny (3%) TOTAL PROJECT COST 2, , , , , , % Table 6: Cost Estimates by Source of Financing Thousands UA Source of financing For. Loc. Total Currency Currency % For. Currency T SF-Pillar I (ADB Group) 3, , , % TOTAL PROJECT COST 3, , , % Table 7: Expenditure Schedule by Component (in UA Thousand) COMPONENTS Total Component I. Improvement of internal resource mobilization Component II. Improvement of the development strategy implementation Composante III. Project management TOTAL PROJECT COST , , , , , , , , Project Target Area and Beneficiaries The project area covers the entire territory of the Comoros (Union and autonomous islands). The Government departments of the country will benefit from ICBP II through the support given to AGID, CGP, the Island General Directorates for the Plan, INSEED, DGEME and DREMEs. Indeed, ICBP II will improve the technical and human capacity 21 of the Comorian public administration. The two national electricity companies (MA- MWE and EDA) will also benefit indirectly from the project, through the country s improved planning/programming capacity for the development of the electricity sub-sector. Furthermore, the Comorian population as a whole (including women and youths) will also benefit from ICBP II which will help improve access to quality basic services through effective implementation of SCADD Participatory Approach for Project Identification, Design and Implementation During ICBP II identification, preparation and appraisal, the Bank organized meetings with the main structures involved in PFM and economic governance issues. It also met key private sector and civil society stakeholders (including gender promotion organizations) who mainly stressed the need to improve the tax administration whose performance is weak. The various meetings organized also shed light on the country s current challenges and the structures that need support in priority under ICBP II to effectively accompany the Comoros in its efforts to exit from its fragility situation. Furthermore, during 21 Including the human capacity of female civil servants. 7

19 each ICBP II supervision mission, consultations will be systematically held with project beneficiaries, the other donors and private sector and civil society stakeholders to ensure its proper implementation and relevance. Project monitoring-evaluation reports will also be prepared on a quarterly basis and submitted to project beneficiaries for their views and comments. 2.7 Bank Group Experience and Lessons Reflected in Project Design The Bank portfolio in the Comoros has seven public sector operations for a total commitment of UA million 22. The energy sector is the leading sector of concentration, with UA million (39% of total commitments), followed by the multi-sector (governance and public finance management) with UA million (32%), and the water and sanitation sector with UA 9.74 million (29%). The portfolio review conducted in May 2015 deemed that the portfolio performed satisfactorily overall in terms of project implementation progress (IP) and probability of achieving its development objective (DO), with an overall score of 2.38 on a scale of 0 to 3. The Bank portfolio in the Comoros has no problematic project (PP) or potentially problematic project (PPP) 23. It is relatively young, with a project average age of 3 years. Although the disbursement rate, which is improving steadily, stands at 55.94% in October 2015, the last portfolio review brought to light certain difficulties, particularly the project implementation rate which is not adequate due to: (i) insufficient mastery of Bank rules and procedures by the project implementation units; (ii) inadequate reflection of the country s fragility situation in project design. Table 8: Lessons Learned from Other Projects and their Reflection in ICBP II Design Lessons Learned from Other Projects Need to better train project implementation structures and beneficiaries in procurement and financial management (ICBP I of Comoros) Requirement of greater selectiveness during project preparation (PAMOCI of Togo) Need to very closely supervise operations implemented in fragile contexts (PARSEGF of the Comoros) 2.8 Key Performance Indicators Reflection in ICBP II During ICBP II supervision missions, training in procurement and financial management will be systematically organized for the project implementation structure and beneficiaries. While ICBP I had eight distinct intervention areas, ICBP II has only three. ICBP II will be supervised three times a year. Moreover, its design was underpinned by a fragility analysis pursuant to the guidelines of the Bank Group Strategy for Addressing Fragility and Strengthening Resilience in Africa The key performance indicators of ICBP II are presented in the table below. 22 Cf. Annex 2 on the portfolio situation in the Comoros. 23 Nevertheless, in the Comoros, project implementation suffers from insufficient mastery of Bank rules and procedures by the project implementation units. 8

20 Table 9: Key Performance Indicators Output Indicators Operationalization of the technical services of AGID Tax management software Number of AGID workers trained in taxation, tax audit and tax collection Number of national tax awareness campaigns Number of civil servants trained in economic planning/programming IT tools for economic planning/programming Sector strategies aligned on national development strategy and having a strong gender component and related action plans National accounts according to SCN 93 HCPI National poverty survey mainstreaming gender Outcome Indicators Tax revenue/gdp ratio CPIA score on equity in public resource use Impact Indicators GDP growth rate % of population living below the poverty threshold III. PROJECT FEASIBILITY 3.1 Economic and Financial Performance Since ICBP II is an institutional support project, the analysis in terms of economic rate of return does not apply. However, improvement of the tax administration s technical and human capacities as supported by ICBP II will increase tax revenue, which will represent 14.7% of GDP in 2019, as against 12% in These additional budgetary resources will be used to implement the country s development strategy aimed at achieving inclusive, accelerated and diversified growth. 3.2 Environmental and Social Impacts ICBP II will have no negative environmental impact, and has been classified in Environmental Category 3. On the contrary, since it supports the implementation of SCADD , one of whose components is ecosystems preservation, it will have a positive impact on the environment At the social level, ICBP II will help to improve the living conditions of Comorians in general. The human and material capacity building supported by ICBP II will allow for: (i) a budgetary leeway for pro-poor expenditure; and (ii) better implementation and more effective monitoring of the country s development strategy, which lays emphasis on meeting the population s basic health and education needs and construction of core socio-economic infrastructure ICBP II will contribute to private sector development. By fostering the implementation of the SCADD and development of the electricity sub-sector, ICBP II will have a positive impact on improvement of the business climate and private sector development, one of whose main obstacles is poor electricity infrastructure. Furthermore, as the private sector develops, it will create jobs and have a positive impact on youth unemployment. 24 Under the SCADD, there are plans to scale down the use of firewood. 9

21 As regards gender and at the institutional level, the Ministry in charge of Employment and Labour has a National Directorate of Female Entrepreneurship. The Comoros islands also have a national policy on gender equality and equity which dates back to 2007 and a Female Entrepreneurship Master Plan prepared in In this context, some progress has been made over the past few years in the field of gender. In higher education, an improvement was observed, for instance, in the girl/boy ratio which rose from 0.68 in 2007 to 0.84 in Nevertheless, as regards women s participation in decisionmaking, there is room for improvement. Indeed, the percentage of women in Government is only 27.2 % ICBP II will actively contribute to gender promotion. By targeting at least 30% female participation rate in training organized by the project, ICBP II will have a positive impact on gender. It will also finance the preparation of three sector strategies and the conduct of one poverty survey with a gender component. Furthermore, the support provided by ICBP II will indirectly help to improve the electricity sub-sector. It will help to develop the marketing of frozen fish and modernize agriculture and handicraft in which women are very much involved. The development of these activities will help to increase women s incomes and promote their economic empowerment. Furthermore, better access to electricity will have a positive impact on girls enrolment in rural areas. Indeed, when girls come back from school, they very often have to perform household chores before studying in the evening without electricity Involuntary Resettlement: The project will not lead to any population displacement. IV. PROJECT IMPLEMENTATION 4.1 Implementation Arrangements Executing Agency 26 : Based on a proposal by the Comorian Authorities, the executing structure of ICBP I, attached to the Ministry of Finance, Economy, Budget, Investment and External Trade, in charge of Privatization (MFEBICP), will implement ICBP II. This structure also supports MFEBICP General Secretariat in managing the Private Sector Capacity Building Support Project financed by the Bank for UA 625,000. It has experience and, according to the Bank review, adequate mastery of Bank procurement and financial management rules and procedures 27 (The PIS staff profiles are included in the technical annex B.4). Thus, ICBP II will benefit from the project implementation experience acquired by this structure. The project s strategic management will be entrusted to a Steering Committee chaired by the Secretary-General of MFEBICP. This committee will comprise representatives of all the project beneficiary structures. It will meet at least once every quarter, and will ensure proper implementation of the project as well as monitor its performance. It will also validate project work programmes and annual budgets. To facilitate project implementation, focal points will be appointed in beneficiary structures to serve as link between beneficiary structures and the implementation structure of ICBP II. Each focal point will produce a monthly progress report summarizing the implementation status of activities and the difficulties encountered Financial Management 28 : The existing financial management systems at SEP are satisfactory overall and the overall fiduciary risk is low, which will allow it to implement this project. However, there are a few weaknesses, in particular: (i) the administrative, financial and accounting procedures manual to be adapted; (ii) the absence of a supplier database; (iii) TOMPRO software not configured to systematically produce the resources/use 25 Cf. Technical Annex C.2: Gender Analysis in the Comoros and Gender Aspect of ICBP II. 26 Cf. Technical Annex B Cf. Technical Annexes B.4 and B Cf. Technical Annex B.4. 10